Microsoft Hits Reset on Xbox Team with New Wave of Layoffs

Next week, Microsoft Corporation will lay off a significant number of employees in its Xbox division as part of a larger restructuring effort.

Deeper issues within the computer giant's video game operations are indicated by the decision, which is the fourth significant round of layoffs to hit the gaming arm in as many months.

An international media agency broke the story first, citing internal sources that said managers throughout the Xbox division were told to anticipate large layoffs.

After Microsoft's $69 billion acquisition of Activision Blizzard Inc. in 2023, the Xbox division, which is in charge of the company's game consoles, first-party studios, and other entertainment platforms, has been under more pressure to increase profitability.

Layoff Has Become a Regular Feature of Microsoft

This most recent development follows earlier claims that Microsoft plans to cut thousands of jobs in customer-facing and sales professions by July 2025. The corporation had already laid off about 6,000 employees in May, and in the last two months alone, the number of job losses across all divisions has reached almost 7,000.

One of Microsoft's most affected divisions has been the Xbox team. The corporation let go of 1,900 workers at Xbox and the freshly acquired Activision Blizzard in January 2024. Microsoft later let off 650 more employees from its gaming division in September 2024.

The division's long-term capabilities were severely harmed by the closure of other Xbox subsidiaries as a result of earlier layoff waves. Although Microsoft has not issued an official comment, the reorganisation seems to be in line with a larger change in company policy that emphasises outsourcing and leaner teams.

Microsoft said in April 2025 that it would reduce its in-house sales teams by depending increasingly on outside companies to offer software solutions to small and midsized organisations.

The entire tech sector is still going through a difficult period. With weaker growth projections and increased demands for profitability, even the most profitable companies in the world are reassessing their cost structures.

Microsoft is no exception, with its extensive portfolio that includes consumer games, cloud infrastructure, and enterprise applications.

Microsoft’s Employees in a Panic Mode

Microsoft's long-term gaming strategy is called into question by the frequent waves of layoffs inside the Xbox division, which was originally thought to be a crucial pillar for customer involvement and upcoming metaverse efforts.

Although the Activision Blizzard purchase was historic, analysts point out that the anticipated growth and synergy from the transaction have not yet materialised into observable financial gains.

This might have led Microsoft's executives to adopt a more stringent approach to cost management in the gaming industry. Employee worries are also anticipated to grow as a result of the impending cuts. Internal morale is said to be stressed as a result of multiple waves of layoffs in a very short amount of time, particularly within development and creative teams.

As restructuring talks continue, many Xbox ecosystem personnel are still unclear about their future positions, according to Bloomberg. Broadly speaking, Microsoft's drastic layoffs are part of a larger trend among large tech firms looking to simplify operations after the epidemic, as the hiring boom of 2020–2022 is now being replaced with efficiency and financial restraint.